Kemi Badenoch has pledged that a Conservative government would restore VAT-free shopping for overseas visitors, bringing back the 20 per cent refund scheme that was scrapped in 2021. The Conservatives cited research estimating the move could attract up to 2.35 million additional visitors and generate £4.1bn in extra spending.
Under the plan, a Conservative government would restore VAT refunds for eligible visitors from outside the EU. The party said that if the evidence confirmed the scheme paid its way, it would extend refunds to visitors from the EU by the end of the next Parliament.
The 2021 decision
Refunds for international shoppers were available under the VAT Retail Export Scheme, which the previous Conservative government abolished from January 2021 alongside tax-free airside shopping. According to the Office for Budget Responsibility, the government said at the time the change was made to align with World Trade Organisation rules. An updated OBR estimate put the Exchequer savings from abolition at about £539m by 2025-26.
The figures cited by the Conservatives come from the Centre for Economics and Business Research (CEBR). The party said the policy would benefit shops, hotels, restaurants, transport and the wider tourism industry, and stop spending flowing to rival European destinations.
“I am tired of the doom and gloom that says Britain has to accept decline, tax people more and expect less,” Mrs Badenoch told the Daily Mail.
“We should be ambitious about what this country can do. We have iconic retailers, inventive designers, brilliant manufacturers and some of the best places in the world to eat, sleep and visit.
“Five years of sending shoppers to Paris or Milan is more than enough and I thank the Daily Mail for its important campaign to scrap the hated tourist tax.”
She added: “This policy has been terrible for tourism and terrible for the High Street. Britain should be a magnet for tourists who want to spend, not a country that tells them to take their money elsewhere.”
Mrs Badenoch accused Andy Burnham, who became prime minister in July, of accepting continuing decline under Labour. The pledge comes ahead of Chancellor John Healey’s Budget on 28 October. The Conservative leader has also said she would scrap stamp duty and reverse changes to inheritance tax on farms, and is exploring ways to abolish inheritance tax.
Business reaction
According to the Daily Mail, businesses backing its campaign include Giorgio Armani, Pernod Ricard and the owner of the Westfield shopping centres, which argue that the cost of refunds is outweighed by the benefits of encouraging more visitors. The retail sector has made the case before, with Mulberry urging Mr Burnham to restore VAT-free shopping shortly after he took office.
The bosses of Fortnum & Mason, Paul Smith and the parent company of Claridge’s hotel described Mrs Badenoch’s plans as “pro-growth” and “pro-jobs”, the paper reported.
Sir Rocco Forte, chairman of Rocco Forte Hotels, said: “This is a policy that has been crying out to be reversed. Britain is the only major shopping destination in Europe that denies international visitors a tax refund.”
Helen Dickinson, chief executive of the British Retail Consortium, said of a tax-free shopping scheme: “Done properly, it would boost economic growth and deliver a net benefit to the Exchequer.”
Lord Khan, the Labour Mayor of London, has also called on the government to restore tax-free shopping, describing the decision to scrap it as “a huge mistake”.
Labour response
A Labour spokesman said: “The Tories have pulled off a spectacular U-turn. If they think it’s such a great idea, they should explain why they scrapped it and how they’d pay for bringing it back.”
The Conservatives contrasted the pledge with the government’s plans for a levy on overnight stays. Ministers confirmed this month that England’s mayors will get powers to charge a tourist tax on overnight accommodation, set as a percentage of room costs.
The Tories said the levy would add to the price of family holidays and drive people to holiday overseas rather than in the UK.
